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can mutual fund and etfs can diversify his or her own stock selection? And any downside...

can mutual fund and etfs can diversify his or her own stock selection?
And any downside about mutual funs and etfs?

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Answer #1

Explanation :

Mutual fund is defined as the funds which are professionally managed.These areinvestment fund made from the money of various investors to purchase securities,who cannot purchase securities by themselves but have money to invest. mutual funds are subject to market risks. Types of mutual funds are:
1. open ended,
2. close ended.

It can also be defined as managed portfolio of various stocks ,bonds, and other securities at a loss very small investment invest at lower price.

ETFs are exchange traded funds.These are the investment funds mainly traded on stock exchange. It consists of securities such as stocks, bonds,or other commodities.
Types of ETFs are:

  • commodity funds.
  • currency fund.
  • special funds.
  • equity funds.

They both have a lot of things in common which helps to diversify investment by investors.


Downside of both ETFs and mutual funds are.

1. ETFs

  • The ETFs long term investors do not get advantage of enterprise using changes in prices whereas persons trading in intraday may earn more due to changes in daliy prices.
  • The cost of ETFs is higher as compared to other specific stocks or group of stocks.
  • The yield of ETFs lower in amount as compared to other stocks or group of stocks.

2. mutual funds

  • mutual fund has higher expense ratio and sales charges. These fees reduces over all investment returns.
  • mutual fund managers may get involved in window dressing abusing his or her authorities,this includes extra trading,more replacement, and selling losses before quarter end to maintain books correctly.
  • The investor has to pay taxes on "capital gain" on Mutual Funds through out the year.
  • Mutual Funds can only be traded at closing NAVs at the end of the day even ,if Mutual Funds are traded at any time before cut off time of the same day.
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